Rich Carreiro wrote:
- quote -

Thank you. As you noted, the actual employee contribution
and profit share amount could very well vary. There is
simply no way of knowing the actual amounts of both these
portions. Form 5500 that was mentioned in the later post is
only for plans that have more than $100,000 in assets.

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wrote:

- quote -

Yes.

- quote -

The IRS knows the total amount you may contribute to a Solo
401(k) plan, based on the profit from your schedule C and
the details of your schedule SE, and upon any other elective
deferal plans for it has information reports, such as the
Simple-IRA you have with your employer.

So an IRS computer could, at least in some cases, flag
excessive amounts on line 28.

But I can think of cases where this is not true, for
example, if the self-employed qualified retirement plan was
a traditional 401(a) (formerly Keogh), instead of a solo
401(k), the IRS would seem to have no way of knowing this
from examining 1040 even though the allowed contributions
are (usually) less for the Keogh. It would pop up when they
eventually examine the plan itself (form 5500).

Steve

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"NKaufman" <nashak[at]hotmail.com> writes:

- quote -

Correct.

- quote -

Correct.

- quote -

(a) IRS knows your side-business profit, and therefore can
calculate your max possible profit-sharing contribution.
(b) IRS subtracts (a) from line 28 to get how much of line 28
is your "employee" contribution.
(c) IRS knows from your W-2 from your day job how much you
contributed to the SIMPLE-IRA.
(d) IRS adds (b) and (c) to see if you've gone over the limit.

That's not perfect, of course. If you didn't make the max
profit-sharing contribution the calculation will lead the
IRS to believe you made a higher "employee" contribution than
you really did.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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I think using $10K at two places might be confusing you.

So to start over - let's say I put away $10K in Simple-IRA
at work, $4K from side business and another $12K from
business as profit share.

so, now - $10K is not involved at all since it is mentioned
in W-2.

However for the portion of side business - line 28 includes
both 4K and 12K (it is my understanding that for a sole
prop, one cannot deduct profit share as an expense unless it
is for another employee). hence both amounts are added and
included on line 28. does that sound right? if yes, then how
does the IRS make sure that I did not exceed $14K total
contribution in a year?

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- quote -

No, you only put the $4K on line 28. The $10K deferred by
your employer has already been subtracted from the
appropriate box of W-2.

Steve

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Steve Pope wrote:
- quote -

the question that remains is that for sole props - Line 28
contains both the employee deferral as well as the company
contribution. So in the above scenario, my W-2 shows 10K for
my plan at work, but line 28 now shows $14K (4K my deferral
and 10K employer contribution). so you mean to tell me that
IRS does not look into the breakdown of this line?

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NKaufman <nashak[at]hotmail.com> wrote:

- quote -

The IRS doesn't calculate this, you do. (But they may
also caculate it just to check up on your arithmetic.)

Your full-time job will have given you a W2 which should
show the amount contributed to that employer's 401K plan,
probably on line 12b code D. You need to subtract this from
the overall $14K elective deferral limit when making your
Solo-401K contribution, (which as you note above has both
the elective deferral and profit- sharing components, and
could be as large as $42K) and the total amount you
contribute to your solo 401K is the amount that goes on line
28.

403(b)'s and some other plans also count towards the same
14K elective defferal limit.

Nothing on Schedule C relates to your retirement plan(s),
unless you have employees.

Hope this helps.

Steve

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I have a full time job (with Simple-IRA) and a part-time
consulting business (sole prop with no employees). I maxed
out Simple-IRA. I opened a solo 401k last year and
contributed to it. I want to know how to handle my
contribution and profit -sharing contribution. It seems that
both these amounts would go on line 28 of 1040 rather than
the profit-share going on Sch C. In such a case, how does
the IRS calculate whether or not I have exceeded $14K
contribution in defined plans since this 14K does not
include profit-share. i.e 1040 form would show that I put in
$10K in Simple-IRA, put in 4K for solo 401K and put in
another 10K as profit-share.

Thanks

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